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New India airline Vistara to start flights as rival seeks to stay aloft

India's newest airline announced on Monday it will start flying next month and declared it was "enthusiastic" about the future, as shares of troubled rival SpiceJet rocketed on reports of a rescue.

[NEW DELHI] India's newest airline announced on Monday it will start flying next month and declared it was "enthusiastic" about the future, as shares of troubled rival SpiceJet rocketed on reports of a rescue.

The new carrier, called Vistara - a Sanskrit word meaning "limitless expanse" - said it will make its first flight on January 9.

The airline is 49-per cent-owned by deep-pocketed Singapore Airlines, one of the world's top-rated carriers. Mumbai-based Tata conglomerate, one of India's best-respected brands, controls the other 51 per cent.

"We're enthusiastic. There are no doubt challenges, but we believe in the immense potential of the Indian aviation market," Vistara chief executive Phee Teik Yeoh told reporters.

India's aviation market is expected to be the third-largest globally within a decade. But the sector is plagued by losses stemming from hefty operating costs and bruising fare wars, with no-frills SpiceJet the latest casualty.

Shares of India's second-biggest budget airline jumped 17 per cent to 2.7 rupees on reports that co-founder Ajay Singh had presented a plan to keep the carrier in the skies with help from private equity investors and possibly a foreign airline - though the share price remains a fraction of its 2007 peak.

Business Standard newspaper and other media reported that Singh, who sold his SpiceJet stake in 2010 to new owners, had submitted the proposal to the government to revive the ailing carrier.

The right-wing government, elected in May, is keen to avoid an embarrassing re-run of the 2012 collapse of full-service Kingfisher Airlines, owned by liquor tycoon Vijay Mallya, which left thousands of workers unemployed and creditors holding millions of dollars in unpaid bills.

Business Standard quoted a senior unnamed government official saying that the scheme involved restoring "normalcy of operations" in the "near future".

Aside from the general problems facing the sector, SpiceJet's woes stem from heavy fare discounting, aggressive expansion and the dues it owes vendors, airport operators, oil firms and other creditors, which total hundreds of millions of dollars.

The airline was briefly grounded last week when it could not pay its fuel bill.

SpiceJet's majority owner a media mogul Kalanithi Maran has declared that he can't afford to bail out the airline after spending hundreds of millions of dollars on the carrier.

While analysts say India's aviation future belongs to low-cost carriers, Vistara's chief insisted there was also room for full-service airlines.

"We're here to redefine the flying experience" and "create a demand for a kind of personalised travel" that doesn't exist, he said, referring to the "massification" of the Indian travel market.

Vistara will operate the 148-seater Airbus A320-200 with 16 seats in business class, 36 in premium economy and 96 in economy.

Once it takes off, Vistara will be the third full-service carrier after state-run Air India and Jet Airways, both currently in the red.

The new carrier will start with Delhi to Mumbai flights and will add routes as its current two-plane Airbus fleet grows. It aims to have five planes in a month and 20 Airbus planes within four years.

IndiGo, India's largest passenger carrier, is a budget operation and the only one among the four biggest airlines to consistently report a profit.

Right now, India's airlines are benefiting from lower fuel prices but pressure will be on again if oil prices rebound, analysts note.

Tata also holds a stake in an Indian low-cost carrier, which started flying in June, operated by Asia's biggest-budget airline AirAsia.

The previous Congress government began allowing foreign airlines to buy up to 49 per cent stakes in Indian carriers in 2012.